SPEECH ON BUDGET RESOLUTIONS AND ECONOMIC SITUATION

Posted by Patrick McFadden8pc on March 28, 2012

Mr Pat McFadden (Wolverhampton South East) (Lab): The most significant thing about last week’s Budget is that it did not move the dial on economic growth. The Office for Budgetary Responsibility has confirmed that and said that it has not revised its expectations for growth or employment. On the basic problem facing the country—the need for jobs and growth—the Budget changes precisely nothing. If there was an argument within the Government about a plan for growth, it has been lost. Indeed, the pre-Budget discussion was not about jobs and growth but about which party in the coalition could claim credit for which tax rate they felt related to their own manifesto.

The Treasury Committee recently took evidence from the permanent secretary to the Treasury. He confirmed that regional policy work in the Treasury has been wound up. In fact, the only regional policy the Government have left is to cut public sector pay in the regions. The permanent secretary spoke of “intrinsic scepticism” about policies to drive growth beyond the fiscal measures that we know about. The Budget is the evidence that that scepticism has won through. The Government have hung their flag firmly on deficit reduction alone, abandoning the effort for a convincing plan for growth and jobs alongside it. The Government are persisting with a hit on manufacturing companies, through cuts in investment allowances, to pay for their corporation tax cut. It is not so much the “march of makers” as the levy on the makers to pay for the non-makers. Rhetoric and policy are pulling in two entirely different directions. It is not enough to say that we want to be open for business; the Government have to play their role in helping business to grow and succeed.

If the Budget changed nothing economically, it certainly sent strong political signals. At its heart is a tax cut for those earning over £150,000 a year, paid for by two groups: pensioners, through the freeze in the personal allowance, and also—this has been under-commented on—middle-income earners who are being dragged into the 40% tax bracket, and there are 300,000 of them. Reference has been made to the allowances being frozen before, but Budgets have to be taken in the round. The central message of this Budget is that pensioners and middle-income earners will now pay for a tax cut for people earning far more than them—four or five times more. That is what the Government have signalled politically in the Budget.

Let us think a little about the low-paid. The Liberal Democrats have claimed great credit for the increase in the personal allowance. It is true that it will be of help to some of the low-paid, but there is something else, which we should not forget. There are 300 families in my constituency, and hundreds more in constituencies represented in this House, who will be plunged into poverty by cuts to tax credits, of up to £3,800 a year, unless they can find more hours of work. The money that could have ameliorated that change has gone to a tax cut for people earning more than £150,000.

It is claimed that the Budget is fiscally neutral overall. However, although we know what the measures in it cost, we do not know what they will raise. In the end, the real picture might not be a fiscally neutral Budget, but a gross tax give-away to the richest in the country. That shows the political colours of the Government more than anything else.